What is worse than losing a group or losing to a competitor? Winning a group and getting really low participation.
Why does this happen? Are the employees afraid of losing money? Do they pay cash for everything? Do they think they won’t get sick?
The truth is, they were likely being conservative and thought they would save more money by not electing insurance coverage. Unfortunately, we know this is hardly ever the case. If something catastrophic happens to an employee and they do not have coverage, the financial ramifications can be life altering. Insurance is used to plan for the unexpected, and everyone should have it.
So, how do we get them to see the value, enough to where they don’t think twice about paying for it?
The secret sauce is how you walk an employee through their open enrollment. The selection and timing of which benefits to cover during the open enrollment meeting are key! Flexible Spending Accounts (FSAs), Health Savings Accounts (HSAs), and the power of Section 125 plans are all crucial to the success of a great enrollment.
At Ameriflex, we see different participation rates among our partners. Some agents see 35-80% participation, while others only see 5-10% participation. What’s the major difference?
The difference is utilizing the power of pre-tax to increase a participant’s benefit package. Now, this likely isn’t ground-shattering information for you, and you may be thinking, “I’ve been in the industry for a number of years, and if I had a nickel for the number of times I’ve heard this…” Well, there is method to the madness, and Ameriflex can help.
If you do, then the follow-up has to be something like this: “Let’s lower the hike in premiums by taking taxes out of the equation.”
Below, we’ve outlined four steps that will help you make you more money, increased worksite benefits participation, and help the employees you serve have a better experience and range of coverage.
Step 1: Enroll the core - Medical, Dental and Vision
This has to come first! Based on the plan selections, you can identify the potential out-of-pocket expenses an individual may have. You can also add the participant’s cost share, and calculate the savings they will receive using a Section 125 plan. Example: An employee enrolling as an individual may pay $150/month for medical, $20/month for dental, and $10/month for vision. This adds up to $180/month for the core benefits. $180 at a 30% tax rate = $54/month saved with pre-tax dollars.
Step 2: Enroll the FSA or HSA
This has to come second! Based on the elections for the core, both you and the participant understand the potential out-of-pocket expenses they may have. Copays, deductibles, and anything outside of the insurance that is medically necessary can be covered with these pre-tax benefits. Let’s use the example that the employee is going to cover $500 of their medical deductible, $100 of their vision deductible + $100 for contacts, and their $200 dental deductible. They will also have $100 in Rx expenses which gives a grand total of $1,000 in out-of pocket expenses. $1,000 annually or $83/month at a 30% tax rate= $25/month saved with pre-tax dollars.
Now at this point, you have a grand total of $79/month that the employee will be saving by using a Section 125 plan! It is time to begin making the money work for the participant.
Step 3: Enroll the worksite
You have to position the $79 as additional savings that the employee can now begin to spend on other worksite benefits like Short Term Disability (STD), Long Term Disability (LTD), Accident, etc. Some of these benefits may also be offered pre-tax, so be sure to add to the $79 any other potential pre-tax savings. This conversation should go a lot easier as the employee now has money to spend!
Step 4: Calculate total monthly employee contributions
Calculate the total monthly employee contributions and showcase what it would look like post-tax compared to pre-tax. Being able to show the employee the total savings and the overall benefit package is a great way to become the employee’s trusted advisor and highlight the great deal the employee received! The result should look something like this:
This employee has saved over 50% with the power of pre-tax! That’s real money they can use to pay for groceries, gas, vacation, or a night out on the town. Not only that, but the worksite agent received participation in a total of seven plans, three of which are worksite related.
This methodology works. You will get better participation, and the employee will walk away happy knowing that they have the coverage they need.
Give it a try, and let us know how it goes.
As always, we’re here to help. Give us a call if you have any questions.